.

Us3 the attached excel spreadsheet, based off case 33-A in your book. Set out the details of all assumptions you needed in order to build this budget (see page 180). Your hospital is losing money and you are the CFO that has to help the hospital budget and move towards profitability. This means you have to increase your revenue while reducing your expenses. Think about which services you would add, change, delete and budget for the future accordingly. Remember, if you add a new service under revenue, you also have to add the expenses for that service.

Items to be included in your budget: show the budget for the next 2 years. State your assumptions, if any. This includes anything in the future that may affect the budget, for example, a decrease due to a competitor building a new hospital, etc.. this is NOT in the book, these are your assumptions about what will happen to your business in the next year. Do not simply keep everything the same every year or you will have to close your hospital. You could gain or lose a surgeon/physician, close a poor performing unit, create new benchmarks, have significant cost reductions, etc. Please see me if you have any questions.

there is an excel sheet if you need it

180 CHAPTER 16 Operating Budget Fired BUILDING AN OPERATING BUDGET: PREPARATION Appropriate preparation is an important stage in building an operation Area difficult for the manager to allow adequate time for budget preparate is above and beyond his or her daily responsibilities. Understanding the sequence of budget construction as listed here assists in predictinguet Information Sources format will templates because it ime of you particular healthcare organization. And BUILDING AN OPERATING BUDGET X Exhibit 16- Fixed and Variable Cost Examples Operating Expenses Labor G Salaries Emplosers' Payroll Tarxes Other Employee Benefits Part Time Temporary Contact Labor Other Expenses Drugs and Medical Supplies Rent Insurance Five-car Equipment Lease abere required. ruman sources of operating budi the Operating Revenue Forecta of other operating expenses er who is responsible for bath will not become part of his or her por when the preliminary operating and taken at a different level and Construction Stages Operating budget construction stages include the following: Plan Gather information Prepare input Construct and submit draft version of budget Make required revisions to draft Present preliminary budget Make required revisions to preliminary budget Submit final budget Input includes both assumptions and calculations required to would occur after upper-level management has reviewed the draft. Additi cally be required after the preliminary budget has been presented. The almost never becomes the final version without some degree of revision OR Construction Elements What will your budget look like? Will it follow guidelines from lan you see imahen Asumptions and Computat form? What will be expected of you, the manager: Understanding the histories and competities ments will help you create a budget that is a useful tool tranthe praction proces, you should determine the following soft will templates be available for use? And if so, will they se requited Asto budget we will your budget become a segment only to be combined and consolidated in water the issu may lose some of your line items you lose control of the final produ Na sources made available to you could include, for example, special data processing morra statssistance to locate required information. The levels of review, along with how versions of the budget will be required, depend upon the structure and expectations of the particular healthcare organization. And the time frame should be adequate BUILDING AN OPERATING BUDGET: CONSTRUCTION Budget information sources, assumptions, and computations are all vital to proper operating Building an Owaiting Construction 181 formato del Mulescope tvailable resources Lochorenie Time frame X X operating budget. It is paration, because thine tanding the wal stage cting how much timeve budget construction Badget Information Sources Mae primary sources of operating budget information are illustrated in Figure 16-5. The Birde the Operating Revenue Forecast and the Staffing Plan or Forecast, along with a plan or Forecast of other operating expenses. As Figure 16-1 illustrated earlier in this chapter, the manager who is responsible for both costs and revenues would require the revenue forecast. I Furser, the manager is responsible only for costs and not for revenues), the revemeloretest would not become part of his or her responsibility When the preliminary operating budget is under construction, the capacity-level check- was disused in a previous chapter should also be taken into consideration. (This step my heumertaken at a different level and thus may not be your own responsibility) Operating Revenue Forecast Staffing Pian or Forecast Operating Expenditures Plan Other Operating Expenses evisions to the draften Additional revisions will be H. (The preliminary bude asion.) Capacity Level Checkpoints Preliminary Operating Budget Pipe 16-5 Operating Budget Inputs. Bulget Assumptions and Computations Maker wamptions and computations are somewhat intertwined. car, or will it take he budget construction 33-A Metropolis Health System's Financial Statements and Excerpts from Notes Metropolis Health System Balance Sheet March 31, 20x3 and 20x2 www.es $400,000 825,000 8.950.000 (1.300.000) 100.000 850,000 150,000 $1,150.000 825,000 8,700,000 (1,500,000) 150,000 900,000 200,000 10.625.000 www.cash valens down who is limited Patient accounts recenable wawance for bud debes Obermeables Motores of supplies paid expenses al Current Assets 9.975,000 1,950,000 1.800.000 1.475,000 tovese Is Limited Corporate funded depreciation verbond indenture agreements- huld taste alects Whose Use Is Limited les Current Portion Net Aerts Whose Use Is Limited 1.425,000 3,375,000 (825,000) 2,550,000 3,275,000 (825,000) 2,450,000 19.300,000 19.200.000 opern: Plant, and Equipment, Net Ober Assets 375,000 325,000 $32,800,000 $32.000.000 Til Assets 471 CHAPTER 33 Case Study: Metropolis Health System for rende Ner patient service rever Other revenue $500.000 5,300,000 325.000 175,000 Metropolis Health System Balance Sheet March 31, 20X3 and 20X2 Liabilities and Fund Balance Current Liabilities Current maturities of long-term debt S525,000 Accounts payable and accrued expenses 4,900,000 Bond interest payable 300.000 Reimbursement settlement payable 100.000 Total Current Liabilities 5,825.000 Long-Term Debt 6,000,000 Less Current Portion of Long-Term Debt (525.000) Net Long-Term Debt 5,475,000 Total Liabilities 11,300,000 Fund Balances General Fund 21,500,000 Total Fund Balances 21,500,000 Total Liabilities and Fund Balances $32,800,000 Tial Operating Revenue Lenses Nursing services Other professional service General services Support services 6,300,000 6,500,000 (500,000 6,000,000 Depreciation Amortization Interest 12,300.000 19,700.000 19,700.000 $32,000.00 Provision for doubtful acce Tal Expenses home from Operations tankerating Gains (Losses) Lestricted gifts and meme Interest income perating Gains, Net ad Gains in Excess of spese and Losses 473 Metropolis Health System Financial Statements Metropolis Health System Statement of Revenue and Expenses for the Years Ended March 31, 20x3 and 20X2 $$3,600.000 1.000.000 $34.000.000 1.100,000 Rescue 34,600,000 S500 35,100,000 325.000 Net patient service revenue Other revenue Toal Operating Revenue Expenses 175 6,30%). 6,500,000 (500.000 6.000.000 Nursing services 5,025,000 Other professional services 13.100.000 General services 3.200,000 Support services 8.300,000 Depreciation 1.900.000 Amortization 50,000 Interest 325,000 Provision for doubtful accounts 1,500,000 5,450,000 12,950,000 3.220,000 8,340.000 1.800,000 50,000 350.000 1,600,000 12,300,000 33,760.000 33,400,000 19.700,000 840,000 19,700,000 1.700,000 $32.000.000 Total Expenses Income from Operations Nonoperating Gains (Losses) Unrestricted gifts and memorials Interest income Nonoperating Gains, Net Revenue and Gains in Excess of Expenses and Losses 20,000 80,000 70,000 40.000 100.000 110,000 $1,800,000 $950.000 wires Recente Rady and can 174 CHAPTER 33 Case Study Metropolis Health System for Metropolis Health System Statement of Changes in Fund Balance for the Years Ended March 31, 20x3 and 20X2 $19,700,000 $18.750 General Pund Balance April Revenue and Guns in Excess of Expenses and Losses General Fund Balance March Sist inne retenue bar 1.800.000 $21,500,000 9501 $19,700.00 Marmacy Eimer service Metropolis Health System Schedule of Property. Plant, and Equipment for the Years Ended March 31, 20X3 and 20X2 Medical and surgical su Operating rooms esthesiology Aegvitory therapy Physical therapy FRG und EEG Buildings and Improvements Land Improvements Equipment Total Less Accumulated Depreciation Net Depreciable Assets Land $14.700.000 1.100.000 28,900,000 44,700,000 (26,100,000) 18,600,000 480,000 $14.06.200 1.100.000 27,600.000 42.700.000 (24.2000 18,500,000 Ambulance services Ontyre Hunc health and hospi Substance abuse Och Indlowances and Charit Sabatient Service Revenu Construction in Progress Net Property, Plant, and Equipment 220,000 220.000 $19,300,000 $19,200,000 Radiology and CT scanner Metropolis Health Systems Financial Statements Metropolis Health System Schedule of Patient Revenue for the Years Ended March 31, 20X3 and 20x2 X 000 S18.750.000 Services Reveme Aboutine revenue Lawatan 000 950.000 00 $19.700.000 016-ursery Emergency service $9.750,000 7.300.000 5,760,000 445.000 3,140,000 2.180.000 5,000,000 5,200,000 1,580,000 890,000 1,460,000 1,040,000 890,000 570,000 1.660,000 370,000 765,000 X2 $9.850.000 7,375.000 5.825.000 450.000 3.175.000 2,200,000 5,050,000 5,250,000 1,600,000 900,000 1.475.000 1,050,000 900.000 575,000 1,675,000 375,000 775,000 48,500,000 14,500,000 $34,000,000 Medical and surgical supply and IV Operating rooms Anesthesiology Respiratory therapy Physical therapy EKG and EEC Ambulance services Oxygen $14,000,000 1,100,000 27,600,000 Home health and hospice Substance abuse Other 42.700.000 (24.200,000) 18,500,000 48,000,000 14,400,000 $33,600,000 Sabtotal less Allowances and Charity Care Net Patient Service Revenue 480,000 220,000 $19,200,000 NOW METROPOLIS HEAT we or Operations and Sumn Sistem (Hospital) curren porting cash flows, the hos ne months or less to be cas of supplies used for patier ed the basis of most recent pu sting primarily of debt se od losses are reflected in al corporation and body al fund investments is te pulcorporation of the state, the CHAPTER 33 Case Study Metropolis Health System Metropole Healthy System Schedule of Operating pes for the Year Ended March 1, 2013 and 2x wyses STAHO,000 3,000 195.000 150.000 S5A 52.375,000 1.700.000 1,175.000 Nursing Services Routine Medical Surgical Operating Room Intensive Care Units OIL Nursery Other Total Other Professional Services Laboratory Radiology and CT Scanner Pharmacy Emergency Service Medical and Surgical Supply Operating Rooms and Anesthesia Respiratory Therapy Physical Therapy EKG and EEG Ambulance Services Substance Abuse Home Health and Hospice Other Total 1. 53000 GS 950.000 1.800,000 1.525.000 525.000 700,000 185,000 80,000 160.000 1.295,000 130.000 $13,100,000 1.250.00 $12.950.000 $1,055,000 1.000.000 295,000 170.000 50,000 330,000 $3,200,000 $1.060.00 1.010.000 300.000 175.000 tertion 115 of the Internal Re Past, and Equipment $3.990.000 General Services Dictary Maintenance Laundry Housekeeping Security Medical Records Total Support Services General Insurance Payroll Taxes Employee Welfare Other Total afir property, plant, and equ resting assets are capitalized a method at rates designed to $4,600,000 240.000 1.130.000 1,900.000 430,000 $8,300,000 $ $1,900,000 $1,500 235.0 1.150.000 1.950.00 435.000 $8.500.000 Equipment Land Improvem Buildings and in $1.800.000 Depreciation preciation 50,000 50.000 Amortization Band of Directors has ac wafund depreciation for the ts of suppliestined for patients and is stated as the lower of cost or market. Cost ATCERPTS FROM METROPOLIS HEALTH SYSTEM NOTES TO FINANCIAL Nature of Operations and Summary of Significant Accounting Policies po Hospital System (Hospital) currently operates as a general acute care hospital. The municipal corporation and body politic created under the hospital district Laws of reporting cash flow the hospital considers all liquid investments with an on- Expo Med System Not Financial Statemente 1.500.000 1.100.000 or less to be cash equivalents. rest pen 53.00 STATEMENTS Cod and Carl Equivalents nermined on the basis of most recent purchase price. cements , consisting primarily of delt seturities are carried at market value. Realized and realed gulins and losses are reflected in the statement of revenue and expenses. Investment came from general fund investments is reported as nonoperating gains. a municipal corporation of the state the hospital is exempt from federal and state income under Section 115 of the Internal Revenue Code. Plant, and Equipment samditures for property.plant and equipment and items that substantially increase the use les of existing assets are capitalized at cost. The hospital provides for depreciation on the line method at rates designed to depreciate the costs of assets over estimated useful follow Years Equipment 5 to 20 Land Improvements 20 to 25 Buildings and Improvements 10 sted Depreciation pakartof Directors has adopted the policy of designating certain funds that are bila fund depreciation for the purpose of improvement replacement, or expansion wder Fond Inden al does not pursue c- waintains records to e police During the yea we Sie Calw wy Exprel Louny wene Sec changed in contributions that by donor restriction wito with industry pract, incluch items to be where cu such and emory gains and lose Sud Nerveneme is reported as the estimated Det realizable amounts from paten hurtype, and there for services rendered, including estimated retractive crew an estimated basis in the period the related services are rendered and died in tinder rimbursement arrements with third party payers. Retroactive adjust gunstlender The hospital has contractual agreements with third-party payers. primarily the Medicare and Runde Deprecation Medicaid programs. The Medicare program reimburses the hospital for inpatient services the Prosecte Payment System, which provides for payment at predetermined amounts based difference between established customary change rates and reimbursement is accounted for as reimbursement based upon rates established by the state, subject to state appropriations. The on the discharge diagnosis. The contractual agreement with the Medicaid program provides for marily provides fr edically indigent. S puys for most services requiring specific expertise. However, many individuals volunteer their No amounts have been reflected in the financial statements for donated services. The hospital and $375,000, respe time and perform a variety of tasks that help the hospital with specilic assistance programs and Huur periodsaltlements are determined. Constructwal Agends with Third-Party Payers a contractual allowance Gifts and Beguests Domated Services various committee assignments News Newwww INN xes Marin Care Unrestricted gifts and bequests are recorded on the accrual basis as nonoperating gains ved as revenue include the amount of Niet Patient Service Reve provides healthcare ser Note 2-Cash and Investments Statutes require that all deposits of the hospital be secured by federal depository insurance of be fully collateralized by the banking institution in authorized investments. Authorized invest ments include those guaranteed by the full faith and credit of the United States of Americas to principal and interest or in bonds, notes, debentures, or other similar obligations of the United States of America or its agencies, in interest-bearing savings accounts or interest-bearing certificates of deposit or in certain money market mutual funds. cables from patients Medicare Medicaid Oher third-party payers mes and Los the car the estimated net reales rendered, meloding entered terror svith third-party payers. Retrie A the related services e rendered 20 Pored on reely the di wally insured by the Festerul Deposit Insurance Cortion or coated the bank amerimarily entscheiat March When the wpital's name by the hospitalet ment Agency Securities Nghi (14) Bill Gat116-11-Fal Fund y the state, subject to The Under Bond Indenture Agreements roluntarily provides free care to patients who lack financial resources and are dhe medically indigent. Such care is in compliance with the hospital's mission. Be- attements for donated service the core policy. During the years ended March 31, 20X3 and 20X2, such charges forgone atteported as revenue 95.000 and $375,000, respectively. wat Securities ar mined 51.325.000 1.325.000 3.000 190,000 7.000 4,525.000 $3575.000 3.575.000 3.000 4.000 3,675.000 Cayers I third-party pavers, primarily the on rimburses the hospital for in es for payment at predetermined reement with the Medicaid program per 1.150.000 400.000 Whole Limited Dporate Funded Depreciation 1.950.000 1.425.000 $1.525.000 1.800.000 1.475.000 $3.675.000 ge rates and reimbursements wf-Charity Care he accrual basis as nonoperti . de bosquitul does not pursue collection of amount determined to qualify as charity care. or hospital maintains records to identify and monitor the level of charity care it provides conds anclude the amount of charges forgone for services and supplies furnished under However, many individuals pital with specific assistance pegame Net Patient Service Revenue al provides healthcare services through its inpatient and outpatient care facilities. and receivables from patients and third-party payers at March 31, 20X3 and 20x2. is as 20X3 ured by federal depository aorized investments Author edit of the United States of A or other similar obligatie sonings accounts or interberg funds 30.0% Medicare Medicaid Patients Other third-party payers Total 15.0 13.0 42.0 100.0% 20X2 28.5% 16.0 12.5 43.0 100.0% The plasaments with third party prayers that provide to pay reimbursement programs represent the difference between the hospitals talat amount willent from its established rates Contractual adjustments under services and amount paid by third party prayer summary of the past Inpatient acute care rendered to Medicare program beneficiaries is paid app determined rates per discharge. These rates vary according to a patient casification is based on clinical diagnostic, and other factors, Infraternicute este es Outpatient services are paid based upon either a cost reimbursement method tentative rate with final settlement determination after submission of annual con Screens, or a combination thereof. The hospital is reimbursed into reimburse hospital and audits by the Medicare fiscal intermediary. At the current year settlements for the previous two years are subject to audit and retroactive adjustment determined rates per day. Outpatient services rendered to Medicaid program benefici Inpatient services rendered to Medicaid program beneficiaries are reimbursedap enes Plant Equipment ach completion, as antica debt consists of the follow ps from Mer Char33 Case Study: Metropolis Health System and improvements major third party payers follows Media werd depreciation Spectable lesers rations in progress tion in progress, which period because of a Medicaid Long-Term Debt al Facility Revenue Bonds estates from 4.5% to 5.5%. through 2020 are maturities of long-term Einting March 31 reimbursed at prospectively determined rates-per-visit. Blue Cross methodology. The hospital is reimbursed at a tentative rate with final settlement determined Inpatient services rendered to Blue Gros subscribers are reimbursed under a Creme reimbun submission of annual cost reports by the hospital and audits by Blue Crows. The blur G. report for the prior year end is subject to audit and retroactive adjustment. The hospital has also entered into payment agreements with certain commerciali carriers, health maintenance organizations, and preferred provider organizations. The for payment under these agreements include discounts from established charges and page tively determined daily rates. Gross patient service revenue for services rendered by the hospital under the Medicine. Mes icaid, and Blue Cross payment agreements for the years ended March 31, 2013 and me approximately as follows: 20X3 20x2 Amount Amount Medicare $20,850,000 43,0 $19.500.000 12 Medicaid 10,190,000 21.0 10,200,000 All other payers 17,460,000 36,0 17,300,000 $48,500,000 100.0 $17.100,000 20X3 20X4 20X5 20X6 20X7 Thereafter or terms of the trust inde be an interest fund, a bond EEEE al deposits (monthly) into interest payment due on Note 5-Property, Plant, and Equipment The hospital's property, plant, and equipment at March 31, 2009 and 2012 wees Wong Fund hal deposits (monthly the principal due on to reach completion, as anticipated additional expenditures are currently estimated at 181 wwwpet from emplos de St. No Pilot Stats sharp de fos and improvement OX $14.700.000 1.100.000 28.000.000 $1,700,000 (26,100,000) S180.NO 180.000 220,000 $19,300.000 BOX $14.000.000 1.100.000 27.000.000 $12.700,000 (21,200,000 $18,500,000 180,000 220.000 $19,200,000 Ladiem bed dageclotion Coments wider the beneficiariis paid at po char Inpatinoacute care service a cor patient ciucation harus reimbursement methods simbined for cosi reimbursems Cuction in progress, which involves a renovation project has not progressed in the gerod because of a woning dispute. The project will not require significant mediary. Ar the current year end, all Me on aer submission of annual cos to audit and retroactive adjustment beneficiaries are reimbursed a prosperite rendered to Medical program benefician ribcare reimbursed undera costrcima rritative rate with final settlement determined Stal and audits by Blue Cross, The Blue Cros and retroactive adjustment. agreements with certain commerciali nd preferred provider organization. The discounts from established charges and proupes dered by the hospital under the Medicare, the years ended March 31, 20x3 and 2 Cronin progres e Property Plant Equipment Note 6--Long-Term Debt Ligger debt consists of the following Hospical Facility Revenue Bonds (Series 1995) at varying interest rates from 45% 15.5%, depending on date of rarity thrash 2030 20XS 20X2 $6,500,000 $6,000,000 The future mutarties of long term debt are as follows: Years Lading March 31 $ 475,000 20X3 500,000 20X4 525,000 20X3 550,000 BUX6 575,000 20X7 600,000 Thereafter 3,750,000 Under the terms of the trust indenture the following funds (held by the trustee) were ahlisbed an interest find a bond sinking fund, and a debt service reserve fund. Interest Fund 43.0 21.0 36,0 100.0 20X2 Amount $19.900.000 10.200.000 17.300,000 $17.400.000 56.5 100.0 The hospital deposits monthly into the interest fund an amount equal to one-sixth of the next semi-annual interest payment due on the bonds. Bond Sinking Find The hospital deposits monthly into the bond sinking fund an amount equal to with the principal due on the next July 1 March 31, 20X3 and 20X2, are as follows steadily over The debt service reserve fund must be maintained at an amount equal to 1096 of the principal amount of all bonds then outstanding. It is to be used to make up any deficiencies Esses held by the trustee under the trust indenture at March 31, 20X3 and 20X2 CHAPTER 33 Case Study: Metropolis Health System De Servier Reserve Fund the interest fund and bond sinking fund, Compa king Finan senchmark as follows: Interest Fund Bond Sinking Fund Debt Service Reserve Total 20X3 $ 300,000 525.000 600,000 $1,425,000 20X2 $ 325,000 500.000 650.000 $1.475,000 Around a Metropolis Note 7-Commitments General Hospi. bal has recen At March 31, 20X3. the hospital had commitments outstanding for a renovation project az gressed in the last 12-month period because of a zoning dispute. Upon resolution of the hospital of approximately $100.000 Cerastruction in progres on the renovation has not pe pute, remaining construction costs will be funded from corporate funded depreciations ca reserves. elenchmarking a estr where the ho O orders tw ar for all hospita bir Sample, wh Both report uport for Sample 35-B-2 is the the reports ages will be points: The percentile unst all othe mance is go The first colum abommance 180 CHAPTER 16 Operating Budget Fired BUILDING AN OPERATING BUDGET: PREPARATION Appropriate preparation is an important stage in building an operation Area difficult for the manager to allow adequate time for budget preparate is above and beyond his or her daily responsibilities. Understanding the sequence of budget construction as listed here assists in predictinguet Information Sources format will templates because it ime of you particular healthcare organization. And BUILDING AN OPERATING BUDGET X Exhibit 16- Fixed and Variable Cost Examples Operating Expenses Labor G Salaries Emplosers' Payroll Tarxes Other Employee Benefits Part Time Temporary Contact Labor Other Expenses Drugs and Medical Supplies Rent Insurance Five-car Equipment Lease abere required. ruman sources of operating budi the Operating Revenue Forecta of other operating expenses er who is responsible for bath will not become part of his or her por when the preliminary operating and taken at a different level and Construction Stages Operating budget construction stages include the following: Plan Gather information Prepare input Construct and submit draft version of budget Make required revisions to draft Present preliminary budget Make required revisions to preliminary budget Submit final budget Input includes both assumptions and calculations required to would occur after upper-level management has reviewed the draft. Additi cally be required after the preliminary budget has been presented. The almost never becomes the final version without some degree of revision OR Construction Elements What will your budget look like? Will it follow guidelines from lan you see imahen Asumptions and Computat form? What will be expected of you, the manager: Understanding the histories and competities ments will help you create a budget that is a useful tool tranthe praction proces, you should determine the following soft will templates be available for use? And if so, will they se requited Asto budget we will your budget become a segment only to be combined and consolidated in water the issu may lose some of your line items you lose control of the final produ Na sources made available to you could include, for example, special data processing morra statssistance to locate required information. The levels of review, along with how versions of the budget will be required, depend upon the structure and expectations of the particular healthcare organization. And the time frame should be adequate BUILDING AN OPERATING BUDGET: CONSTRUCTION Budget information sources, assumptions, and computations are all vital to proper operating Building an Owaiting Construction 181 formato del Mulescope tvailable resources Lochorenie Time frame X X operating budget. It is paration, because thine tanding the wal stage cting how much timeve budget construction Badget Information Sources Mae primary sources of operating budget information are illustrated in Figure 16-5. The Birde the Operating Revenue Forecast and the Staffing Plan or Forecast, along with a plan or Forecast of other operating expenses. As Figure 16-1 illustrated earlier in this chapter, the manager who is responsible for both costs and revenues would require the revenue forecast. I Furser, the manager is responsible only for costs and not for revenues), the revemeloretest would not become part of his or her responsibility When the preliminary operating budget is under construction, the capacity-level check- was disused in a previous chapter should also be taken into consideration. (This step my heumertaken at a different level and thus may not be your own responsibility) Operating Revenue Forecast Staffing Pian or Forecast Operating Expenditures Plan Other Operating Expenses evisions to the draften Additional revisions will be H. (The preliminary bude asion.) Capacity Level Checkpoints Preliminary Operating Budget Pipe 16-5 Operating Budget Inputs. Bulget Assumptions and Computations Maker wamptions and computations are somewhat intertwined. car, or will it take he budget construction 33-A Metropolis Health System's Financial Statements and Excerpts from Notes Metropolis Health System Balance Sheet March 31, 20x3 and 20x2 www.es $400,000 825,000 8.950.000 (1.300.000) 100.000 850,000 150,000 $1,150.000 825,000 8,700,000 (1,500,000) 150,000 900,000 200,000 10.625.000 www.cash valens down who is limited Patient accounts recenable wawance for bud debes Obermeables Motores of supplies paid expenses al Current Assets 9.975,000 1,950,000 1.800.000 1.475,000 tovese Is Limited Corporate funded depreciation verbond indenture agreements- huld taste alects Whose Use Is Limited les Current Portion Net Aerts Whose Use Is Limited 1.425,000 3,375,000 (825,000) 2,550,000 3,275,000 (825,000) 2,450,000 19.300,000 19.200.000 opern: Plant, and Equipment, Net Ober Assets 375,000 325,000 $32,800,000 $32.000.000 Til Assets 471 CHAPTER 33 Case Study: Metropolis Health System for rende Ner patient service rever Other revenue $500.000 5,300,000 325.000 175,000 Metropolis Health System Balance Sheet March 31, 20X3 and 20X2 Liabilities and Fund Balance Current Liabilities Current maturities of long-term debt S525,000 Accounts payable and accrued expenses 4,900,000 Bond interest payable 300.000 Reimbursement settlement payable 100.000 Total Current Liabilities 5,825.000 Long-Term Debt 6,000,000 Less Current Portion of Long-Term Debt (525.000) Net Long-Term Debt 5,475,000 Total Liabilities 11,300,000 Fund Balances General Fund 21,500,000 Total Fund Balances 21,500,000 Total Liabilities and Fund Balances $32,800,000 Tial Operating Revenue Lenses Nursing services Other professional service General services Support services 6,300,000 6,500,000 (500,000 6,000,000 Depreciation Amortization Interest 12,300.000 19,700.000 19,700.000 $32,000.00 Provision for doubtful acce Tal Expenses home from Operations tankerating Gains (Losses) Lestricted gifts and meme Interest income perating Gains, Net ad Gains in Excess of spese and Losses 473 Metropolis Health System Financial Statements Metropolis Health System Statement of Revenue and Expenses for the Years Ended March 31, 20x3 and 20X2 $$3,600.000 1.000.000 $34.000.000 1.100,000 Rescue 34,600,000 S500 35,100,000 325.000 Net patient service revenue Other revenue Toal Operating Revenue Expenses 175 6,30%). 6,500,000 (500.000 6.000.000 Nursing services 5,025,000 Other professional services 13.100.000 General services 3.200,000 Support services 8.300,000 Depreciation 1.900.000 Amortization 50,000 Interest 325,000 Provision for doubtful accounts 1,500,000 5,450,000 12,950,000 3.220,000 8,340.000 1.800,000 50,000 350.000 1,600,000 12,300,000 33,760.000 33,400,000 19.700,000 840,000 19,700,000 1.700,000 $32.000.000 Total Expenses Income from Operations Nonoperating Gains (Losses) Unrestricted gifts and memorials Interest income Nonoperating Gains, Net Revenue and Gains in Excess of Expenses and Losses 20,000 80,000 70,000 40.000 100.000 110,000 $1,800,000 $950.000 wires Recente Rady and can 174 CHAPTER 33 Case Study Metropolis Health System for Metropolis Health System Statement of Changes in Fund Balance for the Years Ended March 31, 20x3 and 20X2 $19,700,000 $18.750 General Pund Balance April Revenue and Guns in Excess of Expenses and Losses General Fund Balance March Sist inne retenue bar 1.800.000 $21,500,000 9501 $19,700.00 Marmacy Eimer service Metropolis Health System Schedule of Property. Plant, and Equipment for the Years Ended March 31, 20X3 and 20X2 Medical and surgical su Operating rooms esthesiology Aegvitory therapy Physical therapy FRG und EEG Buildings and Improvements Land Improvements Equipment Total Less Accumulated Depreciation Net Depreciable Assets Land $14.700.000 1.100.000 28,900,000 44,700,000 (26,100,000) 18,600,000 480,000 $14.06.200 1.100.000 27,600.000 42.700.000 (24.2000 18,500,000 Ambulance services Ontyre Hunc health and hospi Substance abuse Och Indlowances and Charit Sabatient Service Revenu Construction in Progress Net Property, Plant, and Equipment 220,000 220.000 $19,300,000 $19,200,000 Radiology and CT scanner Metropolis Health Systems Financial Statements Metropolis Health System Schedule of Patient Revenue for the Years Ended March 31, 20X3 and 20x2 X 000 S18.750.000 Services Reveme Aboutine revenue Lawatan 000 950.000 00 $19.700.000 016-ursery Emergency service $9.750,000 7.300.000 5,760,000 445.000 3,140,000 2.180.000 5,000,000 5,200,000 1,580,000 890,000 1,460,000 1,040,000 890,000 570,000 1.660,000 370,000 765,000 X2 $9.850.000 7,375.000 5.825.000 450.000 3.175.000 2,200,000 5,050,000 5,250,000 1,600,000 900,000 1.475.000 1,050,000 900.000 575,000 1,675,000 375,000 775,000 48,500,000 14,500,000 $34,000,000 Medical and surgical supply and IV Operating rooms Anesthesiology Respiratory therapy Physical therapy EKG and EEC Ambulance services Oxygen $14,000,000 1,100,000 27,600,000 Home health and hospice Substance abuse Other 42.700.000 (24.200,000) 18,500,000 48,000,000 14,400,000 $33,600,000 Sabtotal less Allowances and Charity Care Net Patient Service Revenue 480,000 220,000 $19,200,000 NOW METROPOLIS HEAT we or Operations and Sumn Sistem (Hospital) curren porting cash flows, the hos ne months or less to be cas of supplies used for patier ed the basis of most recent pu sting primarily of debt se od losses are reflected in al corporation and body al fund investments is te pulcorporation of the state, the CHAPTER 33 Case Study Metropolis Health System Metropole Healthy System Schedule of Operating pes for the Year Ended March 1, 2013 and 2x wyses STAHO,000 3,000 195.000 150.000 S5A 52.375,000 1.700.000 1,175.000 Nursing Services Routine Medical Surgical Operating Room Intensive Care Units OIL Nursery Other Total Other Professional Services Laboratory Radiology and CT Scanner Pharmacy Emergency Service Medical and Surgical Supply Operating Rooms and Anesthesia Respiratory Therapy Physical Therapy EKG and EEG Ambulance Services Substance Abuse Home Health and Hospice Other Total 1. 53000 GS 950.000 1.800,000 1.525.000 525.000 700,000 185,000 80,000 160.000 1.295,000 130.000 $13,100,000 1.250.00 $12.950.000 $1,055,000 1.000.000 295,000 170.000 50,000 330,000 $3,200,000 $1.060.00 1.010.000 300.000 175.000 tertion 115 of the Internal Re Past, and Equipment $3.990.000 General Services Dictary Maintenance Laundry Housekeeping Security Medical Records Total Support Services General Insurance Payroll Taxes Employee Welfare Other Total afir property, plant, and equ resting assets are capitalized a method at rates designed to $4,600,000 240.000 1.130.000 1,900.000 430,000 $8,300,000 $ $1,900,000 $1,500 235.0 1.150.000 1.950.00 435.000 $8.500.000 Equipment Land Improvem Buildings and in $1.800.000 Depreciation preciation 50,000 50.000 Amortization Band of Directors has ac wafund depreciation for the ts of suppliestined for patients and is stated as the lower of cost or market. Cost ATCERPTS FROM METROPOLIS HEALTH SYSTEM NOTES TO FINANCIAL Nature of Operations and Summary of Significant Accounting Policies po Hospital System (Hospital) currently operates as a general acute care hospital. The municipal corporation and body politic created under the hospital district Laws of reporting cash flow the hospital considers all liquid investments with an on- Expo Med System Not Financial Statemente 1.500.000 1.100.000 or less to be cash equivalents. rest pen 53.00 STATEMENTS Cod and Carl Equivalents nermined on the basis of most recent purchase price. cements , consisting primarily of delt seturities are carried at market value. Realized and realed gulins and losses are reflected in the statement of revenue and expenses. Investment came from general fund investments is reported as nonoperating gains. a municipal corporation of the state the hospital is exempt from federal and state income under Section 115 of the Internal Revenue Code. Plant, and Equipment samditures for property.plant and equipment and items that substantially increase the use les of existing assets are capitalized at cost. The hospital provides for depreciation on the line method at rates designed to depreciate the costs of assets over estimated useful follow Years Equipment 5 to 20 Land Improvements 20 to 25 Buildings and Improvements 10 sted Depreciation pakartof Directors has adopted the policy of designating certain funds that are bila fund depreciation for the purpose of improvement replacement, or expansion wder Fond Inden al does not pursue c- waintains records to e police During the yea we Sie Calw wy Exprel Louny wene Sec changed in contributions that by donor restriction wito with industry pract, incluch items to be where cu such and emory gains and lose Sud Nerveneme is reported as the estimated Det realizable amounts from paten hurtype, and there for services rendered, including estimated retractive crew an estimated basis in the period the related services are rendered and died in tinder rimbursement arrements with third party payers. Retroactive adjust gunstlender The hospital has contractual agreements with third-party payers. primarily the Medicare and Runde Deprecation Medicaid programs. The Medicare program reimburses the hospital for inpatient services the Prosecte Payment System, which provides for payment at predetermined amounts based difference between established customary change rates and reimbursement is accounted for as reimbursement based upon rates established by the state, subject to state appropriations. The on the discharge diagnosis. The contractual agreement with the Medicaid program provides for marily provides fr edically indigent. S puys for most services requiring specific expertise. However, many individuals volunteer their No amounts have been reflected in the financial statements for donated services. The hospital and $375,000, respe time and perform a variety of tasks that help the hospital with specilic assistance programs and Huur periodsaltlements are determined. Constructwal Agends with Third-Party Payers a contractual allowance Gifts and Beguests Domated Services various committee assignments News Newwww INN xes Marin Care Unrestricted gifts and bequests are recorded on the accrual basis as nonoperating gains ved as revenue include the amount of Niet Patient Service Reve provides healthcare ser Note 2-Cash and Investments Statutes require that all deposits of the hospital be secured by federal depository insurance of be fully collateralized by the banking institution in authorized investments. Authorized invest ments include those guaranteed by the full faith and credit of the United States of Americas to principal and interest or in bonds, notes, debentures, or other similar obligations of the United States of America or its agencies, in interest-bearing savings accounts or interest-bearing certificates of deposit or in certain money market mutual funds. cables from patients Medicare Medicaid Oher third-party payers mes and Los the car the estimated net reales rendered, meloding entered terror svith third-party payers. Retrie A the related services e rendered 20 Pored on reely the di wally insured by the Festerul Deposit Insurance Cortion or coated the bank amerimarily entscheiat March When the wpital's name by the hospitalet ment Agency Securities Nghi (14) Bill Gat116-11-Fal Fund y the state, subject to The Under Bond Indenture Agreements roluntarily provides free care to patients who lack financial resources and are dhe medically indigent. Such care is in compliance with the hospital's mission. Be- attements for donated service the core policy. During the years ended March 31, 20X3 and 20X2, such charges forgone atteported as revenue 95.000 and $375,000, respectively. wat Securities ar mined 51.325.000 1.325.000 3.000 190,000 7.000 4,525.000 $3575.000 3.575.000 3.000 4.000 3,675.000 Cayers I third-party pavers, primarily the on rimburses the hospital for in es for payment at predetermined reement with the Medicaid program per 1.150.000 400.000 Whole Limited Dporate Funded Depreciation 1.950.000 1.425.000 $1.525.000 1.800.000 1.475.000 $3.675.000 ge rates and reimbursements wf-Charity Care he accrual basis as nonoperti . de bosquitul does not pursue collection of amount determined to qualify as charity care. or hospital maintains records to identify and monitor the level of charity care it provides conds anclude the amount of charges forgone for services and supplies furnished under However, many individuals pital with specific assistance pegame Net Patient Service Revenue al provides healthcare services through its inpatient and outpatient care facilities. and receivables from patients and third-party payers at March 31, 20X3 and 20x2. is as 20X3 ured by federal depository aorized investments Author edit of the United States of A or other similar obligatie sonings accounts or interberg funds 30.0% Medicare Medicaid Patients Other third-party payers Total 15.0 13.0 42.0 100.0% 20X2 28.5% 16.0 12.5 43.0 100.0% The plasaments with third party prayers that provide to pay reimbursement programs represent the difference between the hospitals talat amount willent from its established rates Contractual adjustments under services and amount paid by third party prayer summary of the past Inpatient acute care rendered to Medicare program beneficiaries is paid app determined rates per discharge. These rates vary according to a patient casification is based on clinical diagnostic, and other factors, Infraternicute este es Outpatient services are paid based upon either a cost reimbursement method tentative rate with final settlement determination after submission of annual con Screens, or a combination thereof. The hospital is reimbursed into reimburse hospital and audits by the Medicare fiscal intermediary. At the current year settlements for the previous two years are subject to audit and retroactive adjustment determined rates per day. Outpatient services rendered to Medicaid program benefici Inpatient services rendered to Medicaid program beneficiaries are reimbursedap enes Plant Equipment ach completion, as antica debt consists of the follow ps from Mer Char33 Case Study: Metropolis Health System and improvements major third party payers follows Media werd depreciation Spectable lesers rations in progress tion in progress, which period because of a Medicaid Long-Term Debt al Facility Revenue Bonds estates from 4.5% to 5.5%. through 2020 are maturities of long-term Einting March 31 reimbursed at prospectively determined rates-per-visit. Blue Cross methodology. The hospital is reimbursed at a tentative rate with final settlement determined Inpatient services rendered to Blue Gros subscribers are reimbursed under a Creme reimbun submission of annual cost reports by the hospital and audits by Blue Crows. The blur G. report for the prior year end is subject to audit and retroactive adjustment. The hospital has also entered into payment agreements with certain commerciali carriers, health maintenance organizations, and preferred provider organizations. The for payment under these agreements include discounts from established charges and page tively determined daily rates. Gross patient service revenue for services rendered by the hospital under the Medicine. Mes icaid, and Blue Cross payment agreements for the years ended March 31, 2013 and me approximately as follows: 20X3 20x2 Amount Amount Medicare $20,850,000 43,0 $19.500.000 12 Medicaid 10,190,000 21.0 10,200,000 All other payers 17,460,000 36,0 17,300,000 $48,500,000 100.0 $17.100,000 20X3 20X4 20X5 20X6 20X7 Thereafter or terms of the trust inde be an interest fund, a bond EEEE al deposits (monthly) into interest payment due on Note 5-Property, Plant, and Equipment The hospital's property, plant, and equipment at March 31, 2009 and 2012 wees Wong Fund hal deposits (monthly the principal due on to reach completion, as anticipated additional expenditures are currently estimated at 181 wwwpet from emplos de St. No Pilot Stats sharp de fos and improvement OX $14.700.000 1.100.000 28.000.000 $1,700,000 (26,100,000) S180.NO 180.000 220,000 $19,300.000 BOX $14.000.000 1.100.000 27.000.000 $12.700,000 (21,200,000 $18,500,000 180,000 220.000 $19,200,000 Ladiem bed dageclotion Coments wider the beneficiariis paid at po char Inpatinoacute care service a cor patient ciucation harus reimbursement methods simbined for cosi reimbursems Cuction in progress, which involves a renovation project has not progressed in the gerod because of a woning dispute. The project will not require significant mediary. Ar the current year end, all Me on aer submission of annual cos to audit and retroactive adjustment beneficiaries are reimbursed a prosperite rendered to Medical program benefician ribcare reimbursed undera costrcima rritative rate with final settlement determined Stal and audits by Blue Cross, The Blue Cros and retroactive adjustment. agreements with certain commerciali nd preferred provider organization. The discounts from established charges and proupes dered by the hospital under the Medicare, the years ended March 31, 20x3 and 2 Cronin progres e Property Plant Equipment Note 6--Long-Term Debt Ligger debt consists of the following Hospical Facility Revenue Bonds (Series 1995) at varying interest rates from 45% 15.5%, depending on date of rarity thrash 2030 20XS 20X2 $6,500,000 $6,000,000 The future mutarties of long term debt are as follows: Years Lading March 31 $ 475,000 20X3 500,000 20X4 525,000 20X3 550,000 BUX6 575,000 20X7 600,000 Thereafter 3,750,000 Under the terms of the trust indenture the following funds (held by the trustee) were ahlisbed an interest find a bond sinking fund, and a debt service reserve fund. Interest Fund 43.0 21.0 36,0 100.0 20X2 Amount $19.900.000 10.200.000 17.300,000 $17.400.000 56.5 100.0 The hospital deposits monthly into the interest fund an amount equal to one-sixth of the next semi-annual interest payment due on the bonds. Bond Sinking Find The hospital deposits monthly into the bond sinking fund an amount equal to with the principal due on the next July 1 March 31, 20X3 and 20X2, are as follows steadily over The debt service reserve fund must be maintained at an amount equal to 1096 of the principal amount of all bonds then outstanding. It is to be used to make up any deficiencies Esses held by the trustee under the trust indenture at March 31, 20X3 and 20X2 CHAPTER 33 Case Study: Metropolis Health System De Servier Reserve Fund the interest fund and bond sinking fund, Compa king Finan senchmark as follows: Interest Fund Bond Sinking Fund Debt Service Reserve Total 20X3 $ 300,000 525.000 600,000 $1,425,000 20X2 $ 325,000 500.000 650.000 $1.475,000 Around a Metropolis Note 7-Commitments General Hospi. bal has recen At March 31, 20X3. the hospital had commitments outstanding for a renovation project az gressed in the last 12-month period because of a zoning dispute. Upon resolution of the hospital of approximately $100.000 Cerastruction in progres on the renovation has not pe pute, remaining construction costs will be funded from corporate funded depreciations ca reserves. elenchmarking a estr where the ho O orders tw ar for all hospita bir Sample, wh Both report uport for Sample 35-B-2 is the the reports ages will be points: The percentile unst all othe mance is go The first colum abommance